Book excerpt: The Plain And Simple Guide To Music Publishing

Monetizing YouTube, new statutory streaming rates and more

On April 4, the Hal Leonard Corporation will publish the third edition of Randall Wixen's hugely popular and widely praised book, The Plain And Simple Guide To Music Publishing.

What is already regarded as the definitive publication on the ever-changing music industry landscape, the book has been updated to address new topics such as the value of music (how and why streaming yields so little income to content creators), monetizing YouTube, the difficulty of calculating and verifying new statutory streaming rates, access vs. ownership models, locker/cloud storage and more.

Before publishing the first edition of The Plain And Simple Guide To Music Publishing, Wixen established himself as one of the most respected names in the music industry, founding of Wixen Music Publishing, Inc. in Los Angeles. With a sister company, Wixen Music UK Ltd. in London, the companies administer the song catalogs of artists such as George Harrison, The Doors, Neil Young, Tom Petty, The Black Keys, Andrew Bird and Fitz & The Tantrums.

The third edition of The Plain And Simple Guide To Music Publishing can be purchased at this link. Chapter 1 is presented below with a foreword by Tom Petty.

In the early '70s my bandmates and I arrived in Los Angeles, fresh and green, and within days of shopping our demo tape up and down Sunset Boulevard we were offered deals with three different big-time record labels. Just old enough to get ourselves into some real legal trouble, my pals and I went for the deal with the most money up front. A staggering $10,000. No small sum to us in those days, plus there was talk of buying us new amplifiers, and oh, first we had to sign something called a publishing agreement. This came up as we stood pen in hand around the desk, all set to close the deal of a lifetime.

We had no manager, which didn't seem to upset the label, who advised us we might need a lawyer to go over the contracts. We had found one with no trouble on the recommendation of· a bass player we knew in Topanga Canyon. But publishing was something that hadn't really come up in our discussions. The lawyer had seen a quick thousand bucks and told us things looked good to him, so understandably there were some quiet stares between us as we sized up this deal-or-no-deal situation. Hell, why hold this thing up over publishing? Let 'em print the songbooks . . . So we all signed, and drinks were lifted.

Thirty years later, after throwing countless dollar bills at shaky lawyers, some of that deal still sticks to my feet. You may ask, "Who is he to complain?" and you might be right. It's true that after many a well-publicized lawsuit I was able to regain my publishing rights and have had a wonderful and lucrative career in music. But to this day I do not own the copyrights to my first few records. The record company went out of business, and through some spin of the wheel I wound up owning the actual master tapes. But the sacred publishing remains something that can't be bought. How could this happen? It's simple. I didn't have Randall Wixen's book! Hell, in the '50s, the writer of a book like this might have been dropped in a lake with concrete shoes.

Check the shelves: even today, you'll find precious little of this information made simple for the guy on the street. Why? Because music publishing is still one of the greatest scams for ripping off an artist ever created. I am far from alone in having to pay the price of an education in the music business. You'd be hard pressed to find a songwriter without a similar tale of woe or one far worse. I once attended an ASCAP awards dinner and was fascinated to see, time after time, six people go up and take a bow for a song one guy wrote. To the man on the street it must be hard to imagine how something that is so personal and intangible can be wrestled away from the poor fellow who was humming something in his head, to become a stream of income for countless shysters, corporations, managers, and ex-wives. But yes, my friend, as you will read in these pages, this is often what happens.

It has been my pleasure to know this book's author for many a happy year of him managing my two publishing companies (as he does for a number of writers I have great respect for). And I always feel sure he'll track down every penny on B sides only released in Guam. Randall Wixen is that rare man of integrity in a business that I'm not gonna call crooked, but I'm not gonna call it anything else. Anyway, here's a chance to learn how to own those random inspirations that cross your mind, and a book that could be the most valuable writing partner you'll ever hook up with.

Enjoy, Tom Petty

Overview

What is "music publishing?" It is certainly not what it sounds like. Hearing the words "music publisher," one gets the idea that it involves the printing and publishing of printed sheet music. In fact, this is only a very small part of what music publishers actually do.

"Music Publishing" is the owning and exploiting of musical copyrights. There are many types of "rights" within a "copyright" that can be exploited. One can license the reproduction of sound recordings such as CDs, tapes and records. One can license public performance of a song. Songs may be "synchronized" in timed-relation with visual images in movies, television shows, and in DVD and VHS programs. They can be incorporated into advertising, karaoke programs, telephone ringtones, "samples," MIDI sequences, piano rolls, greeting cards, toys, video games, internet uses and more. And of course, songs can also be exploited and sold as written sheet music.

The music publisher controls all of these rights with respect to a given use. Additionally, in almost all instances other than the licensing of sound recordings embodying a publisher's song (where special "compulsory" provisions may apply), the publisher has the legal right to determine whether or not a particular use is one that he wants to license, or one that he wants to forego. In these instances, he also gets the right to ultimately determine the license fee or royalty rate received through negotiations with the final user. In short, music publishers are really "rights holders and licensors" and not primarily people with printing presses.

The control and licensing of compositions is a unique responsibility. Great care must be taken to determine which uses are appropriate for a given song, and what fees should be charged. A long-term view must be incorporated into this analysis and the effect of granting a particular license must be weighed against the effects that the use will have on the song. For example, licensing a critically prestigious work to a television dog-food commercial for $100,000 would certainly make the publisher $100,000, but it would likely have negative long-term effects on other licenses and uses. Such a commercial if well known and frequently shown would in all likelihood make other artists less likely to make new recordings of the song and would also likely eliminate synchronization uses (i.e. the song in synchronism with pictures such as in films and tv shows.) Neither recording artists nor film and television producers would be as interested in using a song with strong dog-food associations in the mind of the general public. Accordingly, care in decision-making will result in the long-term health of a musical copyright.

Copyright

Under United States Copyright law, a musical work is protected by law and inures to the benefit of the authors once it has been "fixed in a tangible medium from which it may be reproduced." What this means, is that once a writer "records" the work into a media from which it can be reproduced in his absence, it is copyrighted. Examples of this "fixing" would be writing down words and notes on a piece of paper, singing a melody and words into a cassette recorder, embodying the song in some sort of computer file, or even developing a notation language and putting notches on a stick. The only requirement is that given the proper play-back instructions or mechanisms, someone must be able to reproduce the essence of your song.

The filing of a completed copyright form along with a copy of the work fixed in a "tangible media" with the U.S. Copyright Office is a formality with many significant benefits. But the failure to do so does not mean that an author does not own the copyright and the rights attendant thereto. Your copyright exists from the instant you "fix it," from the moment you put it onto paper, tape, sticks, etc.

Registering your works does give you additional rights, although the most significant rights are already yours without the formality of registration. Registration is required, for example, before you can institute a copyright infringement suit in a Federal Court. But there is no time limit after creation when a work can be registered. So if you wrote a song 25 years ago and never registered it with the copyright office, and someone just got a tape of it and put it in a film without your permission, you could presently register the song, and then sue for infringement. But if your evil brother-in-law Smedley copyrighted the song 20 years ago without your knowledge, listing himself as the owner and writer, then you'd have a hard (but not necessarily impossible) time convincing a court that you are the rightful owner and claimant, and entitled to damages and other compensation from the film company.

Registration of a work constitutes "prima facie" evidence that you are the owner. By analogy, "prima facie" evidence is a little like registering the deed to your property with the county recorder. You might actually own the property, but registering the deed or your claim with the county-recorder gives official public notice to your claim. Such registration is pretty strong evidence that you make the claim to the property, but again, if someone wrongly registered a deed to your property in their own name with the local county recorder, it wouldn't necessarily prevent you from taking legal action to show that such recordation was fraudulently made. Given the relative benefits to the cost of recordation (both deeds and copyrights), it is highly advisable to do it.

Songs are registered in the copyright office on what is called a PA form. "PA" stands for "performing arts," and includes not only musical works, but also dramatic works (such as scripts and videotaped improvisations), dance choreography, motion pictures and other audio-visual works. The charge for a PA copyright is currently $30, and also requires a deposit be made of the work as fixed in its tangible media. So in other words, you send them your $30, fill out the form, and send them a tape of you singing your new hit song, and eventually they will send you back a copyright certificate with the copyright office seal on it.

Two Types Of Copyrights

An important distinction must be made at this point. There exists another type of copyright, an SR copyright, which is used to copyright sound recordings. According to the copyright office: "Sound recordings are 'works that result from the fixation of a series of musical, spoken, or other sounds, but not including the sounds accompanying a motion picture or other audiovisual work.' Common examples include recordings of music, drama, or lectures."

It is extremely important that the reader grasp and comprehend this distinction at this point, or otherwise the rest of this book will lack proper meaning. Let's take two scenarios.

You are the Beatles. (Congratulations on your fine career!!) You have just recorded "Twist And Shout" by Phil Medley and Bert Russell. The music publishers of "Twist And Shout" own the PA copyright. That is, they own the composition itself. Your record label registers an SR copyright of you, the Beatles, doing the song.This SR copyright does not cover the composition "Twist And Shout," but only your performing elements within this recording, such as your singing and playing of instruments. The PA copyright in the underlying composition is still owned and controlled by Medley's and Russell's publishers.

Likewise, your other contemporaries such as Tom Jones and the Isley Brothers who are also recording this great song, have labels that are themselves obtaining SR copyrights in their artists' particular recording of the song.

In general, then, there is only one PA copyright in and to the underlying composition, but there may be any number of SR copyrights corresponding to many different master recordings. (Exceptions to this general statement that there is only one PA copyright might be different PA forms filed for works in published and unpublished forms, or in special PA arrangements such as a PA copyright in a marching band or "classical guitar" arrangement of a song.)

Mechanical Royalties

The rights payable for the use of the underlying composition (the PA copyright) is called a "mechanical royalty." The mechanical royalty is fixed at a "statutory rate" in the United States, that is, at a rate that is fixed by "statute" or law. At the time of publication, the statutory rate for a song whose performance of the song that is under five minutes in length is 8.5¢ per copy distributed. The mechanical royalty that a publisher accepts may also be negotiated downwards by the record company offering the publisher additional incentives such as advances. Such reductions are entirely a matter of negotiation between the publisher and mechanical user, and will be discussed at greater length in later chapters.

The rights payable to you mop tops by your label for your particular master recording are not governed by statute, but are rather governed by the terms of whatever your negotiated recording agreement is. These are generally called "artist royalties," but are on occasion referred to as "master license royalties" or "recording royalties." For consistency sake, we will refer to these payments in this book as artist royalties. (Mechanical royalties, too, are sometimes referred to alternatively as "copyright royalties," but we prefer not to use this convention as there are in reality, different types of copyright royalties.) In general, the current practice is that artist royalties are paid based on a percentage of the wholesale or retail selling price of the recording, whether it is in CD, tape, internet delivery, or other form. Additionally, you as a recording artist may even elect to waive royalties altogether and do your recording for a flat fee, or on a "work-for-hire" basis.

So we can see that both the writers and the recording artists get paid, and in separate and different ways.

Now let's look at a second scenario.

You're still the Beatles, but now you've written a song called "Something." What changes? Not much really, except that you're now wearing two hats. You're the recording artist and you still get your artist royalties. But even though you've written the song yourself, your record label still has an obligation to pay mechanical royalties for the use of the underlying composition you've written. Such mechanical license and payment will be, in this instance, made to George Harrison's publishing company.

A few additional words of note on mechanical royalties. First, generally speaking, record labels must pay mechanical royalties to you for each and every record they distribute. Usual industry standard and practice is that there are no costs or advances deducted from mechanical royalties, and that mechanical royalties are payable to you from the first record they distribute onward. Artist royalties, on the other hand, are more typically recouped by the record label against the recording and other costs that they have advanced to you. It is the usual case that recording artists are standing behind large balances to recoup while publishers of songs on that same record are in the black from record one.

At the beginning of this chapter, we discussed several types of publishing royalties. We have thus far developed a better understanding of mechanical royalties.

Performance Royalties

Let's move on now and discuss another type of publishing royalty, the performance royalty. Performance royalties (and the underlying performance license) relate to the performance of your song in public. The performance of your song may be made in many ways and for many different types of benefits. The two most common types of public performance are performance of your song on radio or tv. Radio and tv stations like to perform your works because it helps them attract listeners and viewers, which in turn helps them to sell advertising.

Some other public performers of music (who must therefore license said rights) are restaurants, nightclubs, bars, aerobic studios, airlines with movie and/or tv services, kiddy gyms, schools, clothing boutiques, stores, telephone hold music services, elevator and environmental music providing services, and concert venues.

Performance royalties may be licensed directly to a user by a publisher. However, the general practice of music publishers is to license the right to license public performance of his works to an organization which specializes in licensing and collecting performing rights. The two biggest such organizations that license music performing rights in the United States are ASCAP and BMI. Their function, and how they work to license and collect performing right income for music publishers, will be discussed at greater length in a separate chapter.

Synchronization Royalties

Another of the significant types of licensing and royalties for music publishers is synchronization income. Synchronization occurs when a musical work is synchronized in timed, linear relation with visual images. Examples of this might be for background, theme, and featured uses in motion pictures and television shows. The producer or director might feel that music would enhance the impact of certain scenes or drama within the program. Pre-existing music is often licensed for this purpose and may include current hit or classic songs. Likewise, the producer or director might make arrangements with a composer to write music specifically for the production. Typically, pre-existing music is done on a license basis, while music specifically written to be a part of a production is often done on a work-for-hire (or flat fee) basis, although there are occasional exceptions made to these usual standards of practice.

Just as we made a distinction between artist royalties and mechanical royalties when discussing records earlier in this chapter, we must also make some distinctions here. A film producer will require two analogous sets of rights to put music in his film. First he must "clear" publishing rights from the publisher. Clearing "publishing" from the publisher (PA copyright) is also sometimes (more confusingly perhaps) referred to as a "sync" or "synchronization" license.

He must also "clear" the right to use a particular master recording (SR copyright) within the film, or alternatively, create a master recording specifically for the film. To use our example from above, the production must obtain a "publishing sync license" for "Twist And Shout" from Medley's and Russell's publishers, AND, they must also obtain rights to use a particular recording of the song. This master license might be for the Beatles' master recording, Tom Jones', the Isley Brothers', or may be explicitly commissioned and created by the production specifically for that film, and perhaps the corresponding soundtrack album. It is traditional, although by no means required, that such payments are made on a flat fee (as opposed to royalty) basis and that the Publisher's sync fee is usually the same amount as the master license fee.

Synchronization licenses (except in rare instances discussed in the later specific chapter) may be declined by the publisher (for example, perhaps the publisher doesn't want the song in an X-rated movie or in Rambo 13). The publisher may also limit such licenses to a specific type of use (film festivals only for example) or for a specific period of time (five years only for example.) Likewise, the license may be incredibly broad, covering all uses within the program through the Universe, for the entire life of copyright and any and all renewals, in corresponding advertising and promotions, on home video devices, and in any other media "now known or hereinafter devised." The ranges of synchronization licenses and terms can be broad indeed.

Another important point to be made on synchronization licensing is that one must remember that a synchronization use and a public performance are different things and involve different licenses and rights. Just because a producer licenses a song you have written to be synchronized with his tv show or film, it doesn't follow that a tv station, or airline has the right to publicly perform your work for their financial (or other) benefit. Even though you allowed the producer to put his song in his sitcom, CBS-TV must still obtain public performing rights for the broadcast of the program in which the song was synchronized. While this may seem to some to be double-dipping, it really is not. It is simply the case of each of the two users of your music (the sitcom producer and the tv station) each paying their own share of the portion of the total rights needed for the beneficial broadcast that is applicable to their own needs. The producer needs only synchronization rights, and the TV station only needs the performance rights, so rather than the producer obtain all rights needed to broadcast the show onto television sets everywhere, he shifts this financial burden to its rightful place, the tv station. The producer, himself, gets no direct benefit from the tv broadcast as he himself does not get to sell advertising for the broadcast, so he makes the tv stations pay for the public performing rights out of their advertising and other revenue. (For example in the case of HBO, "other revenue" would not be advertising, but instead monthly fees charged to end viewers.)

A final peculiarity of copyright law in the United States that bears mentioning is the fact that we have no performance license or royalty payable to the owners of master recordings. So, if that sitcom that we were just talking about gets performed on TV, and if that sitcom embodies a pre-existing master recording, there will be no additional performing right fee paid to the owner of the master recording. So while a publisher gets both a synchronization fee from a producer, and also performing right royalties from ASCAP or BMI for the public performance of a song in a sitcom or other production, the master recording owner (unless the master was created as a "work-for-hire") only receives a master license fee for the synchronization of the master recording and NO performance royalty.

Other Types Of Income

There are various other types of licensing and income for music publishers. While not typically as financially important to music publishers, they can, on occasion be very significant. With the printed music realm, such uses would include sheet music, matching album folios, lyric books and internet downloading of printed music. Karaoke uses and cellular telephone ring tones can generate supplemental licensing and revenue. The creation of a "derivative work" may lead to additional use of a song and may include the sampling or interpolation of musical elements from a pre-existing song, or perhaps foreign-language lyrics being set to the original melody. Videogame usage is becoming a place where many songs are used and placed for profit. And technology continues to advance at a pace so that important uses of music of which we have not yet conceived may become commonplace before we know it.

The Guy Who Wrote The Song

Up until now, except when you were busy being the Beatles, we've pretty much ignored the crucial element in music publishing, and that is the creator of the song. Songwriters are often the most overlooked portion of the whole process. You can talk business all day long, but if no-one wrote the song, there is no mechanical license, no performing right, no synchronization, and no cellular ringtone. It all starts with the songwriter.

In the old days, and more or less continuing commonly up until the end of the Brill Building era, songwriters were rarely the same people that popularized the songs. Irving Berlin would write a song, and then Al Jolson would record and otherwise popularize it. Arthur Crudup would write "That's Alright Mama," and then Elvis would have a hit with it.

A songwriter would affiliate with a music publisher, whose job it was to get someone to record the song, or popularize it on Broadway or in a touring vaudeville show. The music publisher took a very active role in taking the creative product and then creating an economic value for it by doing what was then called "song plugging" (now frequently referred to as "professional" or "active" activity.) The writer and the publisher were partners in the venture, and thus was born a traditional 50/50 split of income between the music publisher and the songwriter. The music publisher may have owned the entire song, but the writer got half of the money that the music publisher was able to collect from the users. (A slight exception to this is with respect to the treatment of performance income and such distinction will be discussed in the later chapter on performance income and doesn't effect the previous discussion materially.)

The true end of the traditional publisher/songwriter relationship and arrangement came with the advent of singers who wrote their own songs. Most notably, this was at the beginning of the 1960′s when people like Bob Dylan and The Beatles started writing their own songs and putting them on their own records. Fingers started scratching heads as these artists started wondering why it was necessary to split half the publishing money with a music publisher who was no longer fulfilling the traditional publisher role of getting the songs recorded and doing the work to make them popular. The new singer/songwriters were completing both functions (the writing and the popularizing) on their own and became reticent to receive only half of the proceeds for almost all of the work.

Singer/songwriters moved with some frequency to abandon the traditional relationship with music publishers, and began to start their own music publishing companies. With their own companies they could better control the use of their songs, and keep a greater share of the income in more proper balance to their efforts. Publishing administrators and other people and companies with similar knowledge would be paid relatively nominal fees to handle the business aspects of running the publishing company, issuing the licenses, and collecting the income. The songwriter, then became both the writer and the publisher of the songs and retained the lion's share of the revenue and control and the role of the traditional publisher acting in a traditional way because a much rarer thing.

The traditional writer/publisher relationship still does exist, and can be seen, albeit far less frequently, with artists who are not known primarily as songwriters (Barbra Streisand and Celine Dion as examples) and in quarters where the music producer (analogous to a film director) exerts greater influence, such as in the Nashville music scene, where country recording artists still may record songs that they themselves may not have written, although that, too, is changing now.

The importance of this discussion ruminates throughout the rest of this book in that while the roles of writers and publishers has changed, the structure of the business as it was originally created still remains. To wit, the concept of splitting writer and publisher income on a 50/50 basis is a strong one and still exists in almost every area of the music publishing business. Even if you, Joe Schmoe, wrote a song, and even if you started your own music publishing company, Schmoe Songs, there is still the traditional splitting of income. ASCAP or BMI will still pay half of your public performance income to Joe Schmoe (the writer), and will pay the remaining half of the public performance income earned by your song to Schmoe Songs (the publisher.) You are still receiving 100% of the income, but you are receiving it in two different pockets (on two different statements and with two different payments.) This convention, of there being a "writer half" and a "publisher half" continues strongly to this day and contributes to difficulty and confusion relevant to the collection, licensing and allocation of royalties. Our appendix covers some mathematical examples of this phenomenon.

The intricacies and finer points of writer shares, publisher shares, and "splits" will be further explained in later chapters where relevant. And actually, if it weren't for such atavistic conventions, music publishing would be a lot less complicated, require less math and logic, and songwriters could do a lot more for themselves.

Deeper Digging Ahead

If you have read and absorbed this chapter alone, you probably already know more about music publishing than a lot (most?) of the people you will deal with in the music business. The remaining chapters individually go into greater depth on many of the topics touched upon here (as well as others) and could be used for additional learning, research or reinforcement.

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